Bell to Report Hutton Lacked Controls

NEW YORK —  E. F. Hutton’s top officials bear responsibility for not having installed controls that could have uncovered or prevented illegal overdrafting by the brokerage firm, the Wall Street Journal quoted the head of an internal investigation as saying.

But the executives, including former Hutton President George Ball, were not directly responsible for the scheme, according to Griffin Bell, a former U.S. attorney general who is heading the internal investigation of the overdrafting, the Journal said Thursday.

However, Bell issued a statement calling the Journal’s report inaccurate and premature. He said the Journal broke an embargo agreement he had reached with the reporter from the newspaper.

“I am still interviewing a number of individuals and forming my judgments and conclusions, a fact of which the Wall Street Journal was well aware and did not reflect in the article,” Bell said.

Asked for comment, Stewart Pinkerton, deputy managing editor of the Journal, said: “We think our reporting on this matter speaks for itself.” He maintained that the story was accurate.

The article said the newspaper had agreed to withhold the comments pending the release of Bell’s report but broke the embargo because of a story published by another newspaper Wednesday that carried a brief outline of Bell’s findings.

Hutton pleaded guilty on May 2 to 2,000 counts of mail and wire fraud in connection with the scheme. It also paid $2.75 million in fines and legal costs as part of its settlement with the Justice Department. No individual Hutton officials were named in the plea.

Steve Nelson, a spokesman for Hutton, said Bell “has not completed his inquiry. We believe it is not appropriate to comment on selective reports on it in the news media. We will comment on it in detail when we receive the final report.”

The scheme was “thought of at a lower level,” Bell told the Journal, “but there is considerable responsibility on high for not having the systems to detect the overdrafting.”

Bell told the Journal that any direct management responsibility for failing to detect the scheme did not go higher than Thomas Morley, a senior vice president in charge of the company’s cash management activities. Morley “failed in his duty” by not detecting the illegal overdrafting, Bell said.